Jack v. Walker

• Decision Date: 18 March 1897
• Citation: Jack v. Walker, 79 F. 138 (S.D. Ohio 1897)
• Parties: JACK v. WALKER, Auditor, et al.
• Court: U.S. District Court — Southern District of Ohio

79 F. 138

JACK v. WALKER, Auditor, et al.

United States Circuit Court, S.D. Ohio, Western Division.

March 18, 1897

Paxton Warrington & Boutet, for complainant.

Milton Clark and Brown, Brandon & Burr, for respondents.

SAGE District Judge.

The complainant, a citizen of New York, sues to enjoin the defendants from placing upon the tax duplicate of Warren county, Ohio, the sum of $297,794 of moneys and credits belonging to complainant, being the aggregate of promissory notes secured by mortgages given to complainant upon real estate within said county in the years 1889, 1890, 1891 1892, 1893, and 1894 for loans made by him through George W Carey, his agent; and from adding thereto 50 per cent penalty,-- that is to say, $148,897,-- making the total of $446,691, upon which the defendants threaten to illegally assess taxes against the complainant. The defendants set up in their answer that the moneys and credits mentioned and specified in the bill were, in the years named, invested, loaned, and controlled by said agent, who was, during all of said years, a resident of said county and state; and that none of them have at any time been listed for taxation either by complainant or by said agent. Further answering, they say:

'That the statutes of the state of Ohio provide that every person of full age and sound mind, residing within said state, shall list for taxation all moneys invested, loaned, or otherwise controlled by him as agent, or on account of any other person or persons whatsoever, in the county in which such agent would be required to list the same if such property were his own.'

Complainant excepts for insufficiency. Section 2734 of the Revised Statutes of Ohio provides that every person of full age and sound mind shall list the personal property of which he is the owner, and all moneys in his possession, all moneys invested, loaned, or otherwise controlled by him, as agent or attorney, or on account of any other person or persons, company, or corporation whatsoever, etc.

The answer admits that the complainant is a nonresident of the state of Ohio. The exception presents the question whether debts owned by a nonresident of the state, evidenced by notes and mortgages upon real estate within the state, are there taxable by reason of the agency and control set forth in the answer. The contention for the defendants is that, although the complainant was not and is not a resident of Ohio, the authority and control vested in his resident agent to make the loans and collect and remit interest and principal as they became due constituted such a holding by such agent as under the Ohio laws subjected the property to taxation. Section 2731, Rev. St. Ohio, provides that:

'All property, whether real or personal, in this state, and whether belonging to individuals or corporations; and all moneys, credits, investments in bonds, stocks or otherwise, of persons residing in this state shall be subject to taxation.'

This is the section which designates the property to be taxed. It is urged for the complainant that its proper construction is that all tangible property, real and personal, whether belonging to residents or nonresidents, and all intangible property belonging to residents, is subject to taxation, and that section 2734 defines who shall list personal property for taxation. This section, it is contended, can have reference only to such property as is subject to taxation in Ohio. Intangible property, such as credits belonging to nonresidents, it is claimed is not subject to taxation, and therefore directions as to how taxable property should be listed are immaterial, inasmuch as such property as that owned by the complainant, a nonresident, was not intended to be covered by the section. The notes, it is argued, are not property; they are merely evidences of indebtedness; and, if destroyed, the right of the complainant to enforce the obligation would remain intact, and could not be questioned. The supreme court, in Kirtland v. Hotchkiss, 100 U.S., at page 498, said:

'It is none the less property because its amount and maturity are set forth in a bond. That bond, wherever actually held or deposited, is only evidence of the debt, and, if destroyed, the debt-- the right to demand payment of the money loaned, with the stipulated interest-- remains.'

In the case of State Tax on Foreign-Held Bonds, 15 Wall. 300, it was held that a mortgage, being a mere chose in action, only confers upon the holder or the party for whose benefit it is given the right to enforce payment of his demand by foreclosure and sale; a right which has no locality independent of the party in whom it resides. Applying that case to the present, the true property resided in the complainant, and not in his agent. This is practically the view taken by the supreme court of Ohio in Worthington v. Sebastian, 25 Ohio St. 10, where the court used the following language:

'Intangible property has no actual situs. If, for the purposes of taxation, we assign it a legal situs, surely that situs should be the place where it is owned, and not the place where it is owed. It is incapable of a separate situs, and must follow the situs either of the creditor or the debtor. To make it follow the residence of the latter, is to tax the debtor, and not the creditor; to tax poverty instead of wealth. That it is to be taxed, and that the tax is to be imposed by the law of the creditor's place of residence, seems to be quite well settled by authority.'

Counsel for defendants claim that the moneys and credits of complainant, having been invested and controlled by his agent within this state during the years mentioned in the bill, were taxable in the state under the laws thereof; citing sections 2731 and 2734 of the Revised Statutes, already quoted in this opinion. They refer also to section 2735, which enacts that 'every person required to list property on behalf of others shall list the same township, city or village, in which he would be required to list it if such property were his own,' and they rely upon the second paragraph of the syllabus of Grant v. Jones, 39 Ohio St. 506 (the syllabus being, in Ohio, the authoritative statement of the ruling of the court), which reads as follows:

'Credits owned by a nonresident of this state are not taxable here, unless they are held within the state by a guardian, trustee, or agent of the owner, by whom they must be returned for taxation. The fact that such credits are secured by mortgage on real estate within this state does not change the rule that credits are to be taxed at the residence of the creditor, and not of the debtor.'

In that case the court found that the complainant, who sued to recover taxes assessed against him, was a nonresident of this state, which he visited as often as once a year in his business as a peddler, and looked after his investments remaining only so long as was necessary, then departing, and carrying his notes and mortgages with him. The court below found that his residence for the purpose of taxation was in the state and in the county where the tax was levied. The supreme court reversed that finding. There was no evidence that he had any agent, or that his money or notes or mortgages were held in any sense of the word by any one other than himself. That portion of the syllabus, therefore, which declares that credits owned by a nonresident of this state are not taxable here unless they are held within this state by a guardian, trustee, or agent of the owner, by whom they must be returned for taxation, was not, so far as the exception stated is concerned, necessary to the decision of the case, and must be regarded rather as obiter dictum than as authoritative. Even if it be recognized as authoritative, if we refer to the definition of the word 'hold...